Budget 2026: Telcos pitch sharp licence fee, GST cuts to ease financial stress to fund network investments

telecom

• Telecom industry urges govt to cut licence fees and GST in Budget 2026–27
• COAI seeks GST on spectrum and regulatory payments reduced to 5% from 18%
• Industry urges spectrum policy reform to boost digital infrastructure growth

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India’s telecom industry has urged the government to ease regulatory and tax burdens in the Union Budget 2026–27, warning that sustained investments in next-generation networks hinge on immediate fiscal relief to support the broader goal of Viksit Bharat.

The Cellular Operators Association of India (COAI), which represents Reliance Jio, Bharti Airtel and Vodafone Idea, has called for a steep cut in licence fees to 0.5%–1% to cover administrative costs and a reduction in GST on spectrum and regulatory payments to 5% from the current 18%.

S.P. Kochhar, Director General of COAI, said the measures are revenue neutral for the government and would significantly ease cash-flow pressures on operators, freeing up capital for network expansion, faster 5G rollouts and future technologies.

Push to cut regulatory levies

A key demand from the industry is a sharp reduction in licence-related payments. At present, telecom operators pay a licence fee comprising a 3% levy on adjusted gross revenue (AGR) along with a 5% contribution to the Digital Bharat Nidhi. COAI has proposed lowering the licence fee component to between 0.5% and 1%, arguing that this would be adequate to meet administrative costs.

The industry body has also sought a pause on further contributions to the Digital Bharat Nidhi until the existing, unutilised corpus is fully deployed by the Department of Telecommunications, noting that continued collections add to financial strain without commensurate sectoral benefits.

GST relief and ITC utilisation

COAI has also flagged persistent GST-related challenges, particularly the build-up of unutilised input tax credit (ITC) across the telecom ecosystem. To address this, it has proposed exempting regulatory payments such as licence fees, spectrum usage charges (SUC) and auctioned spectrum from GST.

As an alternative, the association has suggested lowering the GST rate under the reverse charge mechanism on spectrum payments, licence fees and SUC to 5% from 18%, saying the move would curb ITC accumulation while remaining revenue neutral for the exchequer. It has also recommended allowing telecom operators to use existing ITC balances to discharge GST liabilities under the reverse charge mechanism, reducing cash outflows and improving liquidity.

Recalibrating spectrum policy

Beyond immediate fiscal relief, COAI has called for a broader reassessment of spectrum pricing and assignment models, pointing out that telecom has evolved from a standalone sector into a horizontal, value-added enabler for industries such as manufacturing, healthcare, fintech and governance.

Given this expanded role, the association said spectrum policy needs recalibration to ensure affordability and long-term sustainability as India continues to scale its digital infrastructure.

The government is expected to consider these proposals as it finalises the Union Budget for 2026–27, balancing fiscal discipline with the need to accelerate digital growth.